Persons Disqualified by Law

According to Section 11 of Indian contract law, certain persons are disqualified by law from entering into contracts and hence are not competent to contract. Persons disqualified by law include alien enemies, convicts, insolvents, joint companies and corporations and foreign sovereigns and ambassadors. 

Individuals who have attained the legal age of majority and possess a sound state of mind can enter into a contract provided that no law applicable to them disqualifies them from doing so. In summary, anyone who meets these criteria may lawfully engage in a contractual agreement and hence are competent to contract.

Who are The Persons Disqualified by Law?

Alien Enemies

An alien enemy is a person from a country at war with India. Contracts made with alien enemies during the war are considered void, and no contract can be made with an alien enemy without prior approval from the Indian government. However, contracts made with alien friends (persons from countries with friendly or neutral diplomatic status with India) are considered valid. 

Hence, alien enemies are persons disqualified by law to execute an agreement.

This was established in Feroza Begum and Ors. v. Dewan Daulat Rai Kapoor and Ors, where it was observed that Section 83 of the Code of Civil Procedure says “Alien enemies residing in India with the permission of the Central Government, and alien friends, may sue in any Court otherwise competent to try the suit as if they were citizens of India but alien enemies residing in India – without such permission or residing in a foreign country shall not sue in any such court.”

Convicts

Convicts, or individuals who have been sentenced to death or life imprisonment by a competent court, are disqualified by law enter into contracts while serving their sentences. However, after their sentence is completed or they are pardoned, their disqualification is lifted. The concept of disqualification for convicts was removed by the Criminal Justice Act of 1948.

Insolvents

An individual is considered insolvent if the debt balance in their capital account cannot be covered by available cash. Another group of persons disqualified by law are insolvents.

Before an order of discharge, an insolvent person can enter into certain types of contracts, such as incurring debts, purchasing property, or being an employee. 

However, they cannot sell their property, which is under the control of the official receiver. After an order of discharge, the insolvent regains their contractual capacity except with respect to their property. 

In Vraj Kuwar Bai v. Kunjbiharilal Krishna Chandra, it was held that the term “property” refers to the personal property of an insolvent, which they can dispose of at will. 

In Banarasi Das v. Bhagat Ram, it was held that trust property held by an insolvent is not considered their property. Insolvents cannot be magistrates, directors of companies, or members of local bodies, but they retain their contractual capacity except with respect to their property.

Joint Companies and Corporations

A company or corporation is an artificial person created by law and can only enter into contracts within the scope of its Memorandum of Association or special Act provisions. However, they can enter into contracts concerning only their personal nature. Hence, are the persons disqualified by law.

Foreign Sovereigns and Ambassadors

Foreign sovereigns and ambassadors have the capacity to enter into contracts and can sue to enforce contracts in Indian courts. However, they cannot be sued in Indian courts, except if they voluntarily submit themselves to the court or with the approval of the Central Government. They are also considered privileged in proceedings and are ordinarily considered incompetent to contract.

So, foreign ambassadors are also persons disqualified by law to enter into an agreement.

Conclusion

Certain persons are disqualified by law from entering into contracts under certain circumstances and are not competent to contract. Alien enemies, convicts, and insolvents are among those disqualified from entering into contracts. Joint companies and corporations are also disqualified when contracting outside the powers conferred upon them. 

Additionally, foreign sovereigns and ambassadors can enter into contracts, but they cannot be sued in Indian courts without their voluntary submission or approval of the Central Government. These rules are in place to ensure that contracts are entered into with persons who have the legal capacity to fulfil their obligations.